MNI: BOJ Minutes: Price Upside Risk; Early 2% Target Hit

A few Bank of Japan board members flagged potential upside risks to inflation, with one suggesting the 2% price target could be achieved earlier than projected, according to minutes from the April 30-May 1 policy meeting released Friday.

The view contrasts with the BOJ’s April Outlook Report, which highlighted downside risks to prices through fiscal 2026. “A few members pointed out that prices could deviate upward from the baseline scenario, depending on the course of negotiations between jurisdictions,” the minutes said.

One member added that, “even if the GDP growth rate and the year-on-year rate of increase in the CPI developed in line with the outlook presented at this meeting, it was quite possible that underlying CPI inflation would be at a level that was generally consistent with the price stability target in the first half of the projection period of the April 2025 Outlook Report,” depending on inflation expectations and corporate wage- and price-setting behaviour.

This timing is earlier than the second half of the projection period cited in the official outlook.

Meanwhile, many members said the BOJ should closely monitor the outlook for economic activity and prices, citing downside risks and heightened uncertainty.

“Some members expressed the view that real interest rates were at significantly low levels, and it was important to firmly support the economy by maintaining such levels,” the minutes showed.

One member called for a cautious stance until U.S. tariff policy developments become clearer, while another warned that the U.S. tariff measures could prompt Japanese firms to overcut costs, hold back wage increases and investment, and potentially contribute to industrial hollowing.